Minnesota, health providers take on Medicaid costs

ST. PAUL, Minn. (AP) -- Gov. Mark Dayton announced Friday that his administration is partnering with six Minnesota health providers in testing a new Medicaid payment model aimed at reducing the cost of treatment for 100,000 medical assistance enrollees, primarily through a greater emphasis on preventive care.

Under the new approach, the state Department of Human Services will shift from paying primarily based on volume of patients served, to financial incentives for lowering health care costs for those patients. Each year, the cost of care per patient will be compared to mutually set targets for cost and quality; any savings will be shared by the state and providers.

The state and providers would jointly make up losses in cases where cost savings are not achieved.

The administration cited an actuarial study that predicted the new payment system would save taxpayers about $90 million over three years. Human Services Commissioner Lucinda Jesson said her agency already is working to expand the model to more providers who treat the roughly 800,000 people on Medicaid or MinnesotaCare.

"It's not about paying less, it's about changing what we're paying for," Jesson said. Paying health care providers for volume rather than outcomes skews their priorities, Jesson said, creating incentives to simply treat large numbers of Medicaid patients rather than focusing on approaches that prevent health problems.

Jesson called it a "fundamental change" in the way the state provides medical assistance.